Audit (A-07-08-00268)

07-28-2009
Review of Pension Costs Claimed for Medicare Reimbursement by Triple-S, Inc., for Fiscal Years 1988 Through 2006

Executive Summary

Triple-S, Inc. (Triple-S), claimed $2.9 million of unallowable Medicare pension costs for fiscal years 1988 through 2006. Medicare reimburses a portion of the annual contributions that contractors make to their pension plans. In claiming costs, contractors must follow cost reimbursement principles contained in the Federal Acquisition Regulation, Cost Accounting Standards, and Medicare contracts. The overstatement occurred primarily because Triple-S calculated pension expense using Financial Accounting Standard No. 87, a standard intended for financial reporting. Using this standard, Triple-S claimed $7 million in Medicare reimbursement. We calculated allowable pension costs for this period to be $4.1 million, a difference of $2.9 million.

We recommended that Triple-S (1) reduce its Final Administrative Cost Proposal pension costs by $2.9 million or refund this amount to the Centers for Medicare & Medicaid Services and (2) ensure that future pension cost claims are in accordance with the Medicare contracts. In comments on our draft report, Triple-S stated that it was not in a position to concur with our recommendations. After reviewing Triple-S's comments, we maintain that our finding and recommendations are valid.